The consolidated economic report from the 12 Federal Reserve Districts (Beige Book) stated “the majority of Federal Reserve Districts reporting modest to moderate growth“. The previous report stated “economy expanded at a moderate pace“.
Analyst Opinion of this month’s Beige Book
Seems like the rate of growth was slower than last report as this month’s “modest to moderate growth” is weaker than “moderate pace” in the Fedspeak language. Note the following statement from the Federal Reserve:
This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.
Please see the end of this post for words the Federal Reserve uses when the economy is entering a recession. The Beige Book completely missed the 2001 recession, and was late in seeing the Great Recession.
This report was prepared at the Federal Reserve Bank of Richmond based on information collected on or before October 15, 2018.
Economic activity expanded across the United States, with the majority of Federal Reserve Districts reporting modest to moderate growth. New York and St. Louis indicated slight growth, overall, while Dallas reported robust growth driven by strong manufacturing, retail, and nonfinancial services activity. On balance, manufacturers reported moderate output growth; however, several Districts indicated that firms faced rising materials and shipping costs, uncertainties over the trade environment, and/or difficulties finding qualified workers. Demand for transportation services remained strong. Labor shortages were broadly noted and were linked to wage increases and/or constrained growth. Reports on commercial and residential real estate were mixed, although several Districts saw rising home prices and low levels of inventory. Overall, consumer spending increased at a modest pace while consumer price growth ranged from modest to moderate. Travel and tourism generally picked up with a notable exception of North and South Carolina, where Hurricane Florence deterred tourism. Agricultural conditions were mixed as rainy weather helped some farmers but caused delays and crop damages for others, including the loss of crops and livestock due to Hurricane Florence.
Employment and Wages
Employment expanded modestly or moderately across most of the nation; San Francisco reported robust growth while three Districts reported little to no change. Employers throughout the country continued to report tight labor markets and difficulties finding qualified workers, including highly skilled engineers, finance and sales professionals, construction and manufacturing workers, IT professionals, and truck drivers. A couple of Districts reported that worker shortages were restraining growth in some sectors. Many firms reported high turnover rates and difficulties retaining employees. Some businesses implemented non-wage strategies to recruit and retain workers, such as giving signing bonuses, offering flexible work schedules, and increasing vacation allowances. Wage growth was mostly characterized as modest or moderate, though Dallas reported robust growth. Most businesses expected labor demand to increase modestly in the next six months, and looked for modest to moderate wage growth.Prices
Prices continued to rise, growing at a modest to moderate pace in all Districts. Manufacturers reported raising prices of finished goods out of necessity as costs of raw materials such as metals rose, which they attributed to tariffs. Construction contract prices increased to cover rising costs of labor and materials. Retailers and wholesalers in some Districts raised selling prices as they continued to see increased costs in transportation and also worried about impending cost increases resulting from tariffs. Districts reported rising oil and fuel prices but gave mixed reports on movement of agricultural commodity prices.Highlights by Federal Reserve District
Boston
Most firms reported continued expansion. Most retailers, hoteliers, manufacturers, and IT firms saw year-over-year sales increases. Labor markets remained tight and wages increased at a moderate pace. Contacts reported moderately higher prices on average. Outlooks were cautiously optimistic.New York
Activity in the regional economy has grown slightly in the latest reporting period, while labor markets have remained very tight. Both input prices and selling prices have accelerated slightly. Residential and commercial real estate markets have been mixed.Philadelphia
Economic activity continued to expand at a modest pace. Tight labor markets constrained hiring to a modest pace but maintained moderate wage pressures. Price increases remained modest. Notably, manufacturing resumed a moderate pace of growth. The growth outlook is generally positive despite some concerns that excessive inventories will reduce future demand.Cleveland
The District economy grew modestly. Firms widely reported worker shortages and wage increases that were a little higher than the rate of inflation. Strong, upward pressures on fuel, building materials, and metals costs were noted. Nonfinancial services noted a pickup in activity, although retail and transportation lost momentum. Nonresidential construction activity improved slightly.Richmond
The regional economy grew moderately since our previous report. Overall, labor demand strengthened, wages rose modestly, and price growth remained moderate. However, firms across several sectors suffered from Hurricane Florence. The hurricane caused production disruptions for manufactures, port closures, reduced travel and tourism, and damages to crops and livestock.Atlanta
The economy expanded at a moderate pace. Labor markets remained tight, and reports of increasing merit percentages were more widespread. Nonlabor input costs continued to rise, on balance. Retail sales increased. The pace of residential construction grew modestly compared with year earlier levels, while nonresidential construction activity was up. Manufacturing activity remained strong.Chicago
Growth was modest. Manufacturing production and employment grew moderately, consumer and business spending increased modestly, and construction and real estate activity was flat. Wages and prices rose modestly and financial conditions were little changed. Greater-than-usual precipitation slowed the agricultural harvest and reduced the quantity and quality of the crops.St. Louis
Economic conditions in the District have improved slightly since our previous report. Reports from the manufacturing and services sectors were generally positive. The exception was the real estate sector, where reports were notably weaker that other sectors.Minneapolis
Economic activity grew moderately in the Ninth District. Hiring demand was strong, but was held back by tight labor markets. Wages and prices both experienced moderate pressure. Residential construction rose in September. Manufacturing activity grew, but the outlook was uncertain due to trade policy and rising input costs. Farm harvests were expected to be strong, but falling international demand was exacerbating low prices.Kansas City
Economic activity expanded moderately in September and early October, led by strong sales in the retail, whole-sale trade, transportation, and professional and high-tech sectors. Input prices and wage growth accelerated since the previous survey, and strong wage gains were anticipated in the months ahead. Energy activity also picked up, due to stronger activity in the oil sector.Dallas
Economic activity expanded at a solid pace. Healthy growth continued in manufacturing, retail and nonfinancial services. Loan demand increased further while home sales were flat. Capacity constraints restrained growth in the energy sector. Widespread labor shortages pushed up wages while tariffs drove up input costs. Hiring continued, and outlooks remained quite optimistic.San Francisco
Economic activity continued to expand at a moderate pace. Conditions in the labor market tightened noticeably, and price inflation increased moderately. Sales of retail goods picked up slightly, and activity in the consumer and business services sectors was solid. Activity in the manufacturing sector expanded moderately. Activity in residential and commercial real estate markets was robust. Lending activity picked up moderately.
Source
https://www.federalreserve.gov/monetarypolicy/beigebook201810.htm
Fed’s Words When Economy is entering a Recession
For the recession starting December 2007, here is the lead up summary words from the Beige Books:
- 28Nov2007 – “expanding”
- 16Jan2008 – “increasing moderately”
- 05Mar2008 – “growth slowed”
- 16Apr2008 – “weakened”
For the March 2001 recession which ended in November 2001, here are the Beige Book summary words:
- 17Jan2001 – “economic growth slowed”
- 07Mar2001 – “sluggish to modest economic growth”
- 02May2001 – “slow pace of economic activity”
- 13Jun2001 – “little changed or decelerating”
- 08Aug2001 – “slow growth or lateral movement”
- 19Sep2001 – “sluggish”
- 24Oct2001 – “weak economic activity”
- 28Nov2001 – “remained soft”
- 16Jan2002 – “remained weak”
Source: Federal Reserve
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